Stocks to Regain Lead Over Bonds on Stimulus, BNP Predicts
Equities have taken it on chin this year as coronavirus ravaged risk assets, while central-bank pledges have spared bonds pain.
(Bloomberg) -- Equities have taken it on the chin this year as the coronavirus outbreak ravaged risk assets, while massive central-bank pledges have spared bonds the pain. The position may reverse over the rest of 2020, BNP Paribas Asset Management forecasts.
While stocks have handed investors negative returns -- the MSCI All-Country World Index is down 10% this year -- sovereign bonds have fared relatively better because of central bank support in some of the biggest markets.
Expectations the central banks will maintain an accommodative stance to support economic growth will help equities, said Colin Harte, a multi-asset portfolio manager at BNP Paribas Asset in London. On the other hand, large deficits and the risk of them being monetized will weigh on the bond markets going forward, he said.
Harte said he added equities at the depths of this year’s selloff and pared the positions “to neutral” as markets rebounded from the lows.
“Tactically, we are looking for better levels to add materially to our equity exposures,” he said. “We have retained an overweight exposure to risk factors such as being overweight credit and commodities.”
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